Fiscal milk: Dairy price could double

December 29, 2012

While your gallon of milk is doubling from $3 to $6 a gallon, county dairy farmers will be losing their safety net.

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AP?PhotoSen. Charles Schumer says the cost of milk could go to $6 a gallon after Jan. 1 if the Fiscal Cliff issue is not resolved.

That is what is being predicted will happen if the federal government doesn't renew the Farm Bill.

Earlier this month, U.S. Sen. Charles Schumer, D-N.Y., said the U.S. House of Representatives needs to take action on renewing the Farm Bill by Jan. 1 to avoid a "Dairy Cliff." Schumer said the House needs to pass the bipartisan Senate Farm Bill to temporarily bring back the Milk Income Loss Contract program. The renewal will bridge the gap before a new protection program can be passed. If they don't, Schumer said it would devastatingly impact dairy consumers and producers.

The senator said MILC provided more than $41 million to New York dairy farmers in 2012 before it expired on Sept. 30. MILC was the primary safety net that compensated dairy producers when milk prices fluctuated and cow feed costs jumped, as they have done because of this year's drought, Schumer said.

On Jan. 1 the nation will revert to a 1940s-era agriculture policy if it is not renewed.

"Starting January 1st, it goes to policies used after the Great Depression," Schumer said earlier this month.

He said as it relates to New York dairy, that 1940s-era policy requires the government to purchase non-fat dry milk, cheese and butter at prices significantly above current market rates. The massive government purchases of dairy products under this outdated law could cause milk prices to rise above $6 per gallon, according to the National Milk Producers Federation.

Aron Crowell, Chautauqua County Farm Bureau president, said the heart of Chautauqua County's agriculture is dairy farms. He said the Farm Bill not being renewed is something that is implausible.

"There is a real fear right now that there is no safety net," he said. "In the end, without the passing of the Farm Bill, we will see a number of things occur, some of which are almost unthinkable that they could happen."

Crowell said farmers now are getting around $20 per hundred pounds of milk production. A hundred pounds of milk production from a dairy farm equals about 9 gallons of milk in the store.

Crowell said if the Farm Bill is not passed, the price per hundred pounds of milk will at least increase to more than $30 and, more likely, be closer to $40.

"The impact is that the price of milk will almost double, and we will see some crazy fluctuations in the price," he said.

Crowell said, at first, dairy farmers will see an increase in profits if the price does increase considerably. However, demand at that elevated price will drop drastically to the point where farmers will then lose large sums of money.

"Everyone will be affected by the Farm Bill not being renewed. Whether you're big or small (farm)," he said.

Outside of the fluctuation in the price of milk, farmers will lose a crop insurance program that is part of the Farm Bill. This will hurt farmers when unexpected events like Hurricane Sandy hit or unseasonable weather happens destroying crops.

"Without the crop program, they are really taking away the insurance program," he said.

David White, Clymer dairy farmer, said if the Farm Bill is allowed to expire, it will add to his inability to rely on the government.

"What is disheartening is rural America's voice is getting smaller and smaller," he said. "It is harder and harder to have faith in the system."

White said he is already preparing his budget with the mindset there will be no Farm Bill giving assistance.

"When I do my budgeting, I don't budget for a government payment because it is not a reliable figure," he said. "So, really, I plan it being a nonimpact item on my farm. It is one of those things that you can't plan on because you don't know if you have it or not. If it is there, it will help pay some bills. If not, we tighten our belt a little more."